Germany's highest court clears euro bailout fund

Tuesday 18 March 2014 18.49
Germany's highest court ruled today that the ESM is in line with the German constitution
Germany's highest court ruled today that the ESM is in line with the German constitution

Germany's Constitutional Court has confirmed the legality of the euro zone's bailout fund, upholding a preliminary ruling from the height of the debt crisis in 2012 that gave an initial green light to the European Stability Mechanism (ESM). 

The court reiterated that the €500 billion fund did not violate the rights of the Bundestag lower house of parliament to decide on budgetary matters as long as the lower house of parliament had sufficient oversight powers over the ESM. 

The court said measures had been taken to ensure Germany' sliability to the ESM was limited to €190 billion, with any increase subject to approval or veto by the Bundestag.
              
The more than 35,000 plaintiffs included academics and lawmakers from Chancellor Angela Merkel's conservative bloc and the opposition, who argued that the ESM amounts to an illegal transfer of sovereignty from Berlin to Brussels.

The Constitutional Court has a history of delaying EU treaties to test their compatibility with German law, usually reaching the conclusion that parliament has to be consulted fully and taxpayers' liabilities must be limited.
  
As expected, the court did not make any direct comments on the legality of the European Central Bank's "unlimited" bond-buying scheme, the flagship emergency measure taken since the debt crisis began four years ago.
              
The German court took the unprecedented decision last month to defer a ruling on the ECB's Outright Monetary Transactions (OMT) programme - which is credited with saving the euro zone - to the European Court of Justice in Strasbourg.
              
The ECJ is seen as less of a threat to the OMT, which was announced by ECB chief Mario Draghi in 2012 and helped to keep the euro zone together by promising potentially unlimited purchases of the sovereign bonds of member states.
              
The German court could still give its own verdict after an ECJ ruling, which is likely to take over a year. It has already said there was good reason to think the OMT exceeded the ECB's mandate and violated a ban on the ECB funding governments.